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August 10, 2021 11:09 AM

VW joins Tesla's call for lower import tax on EVs in India

Government proposal to reduce taxes on imported cars is opposed by domestic automakers

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    Skoda Aurangabad factory India

    Skoda builds cars at two plants in Aurangabad and Pune in India. Shown is the Aurangabad factory.

    NEW DELHI -- The head of Volkswagen Group unit Skoda's India operations is calling for lower import duties on electric cars to help drive demand for clean vehicles, echoing Tesla's recent pitch that has divided the country's auto industry.

    Cutting duties on EVs even to 25 percent from current levels as high as 100 percent would not pose a "big threat" to domestic players, but would help to drive investment, said Gurpratap Boparai, managing director of Skoda India.

    Skoda has been given the task by VW Group of developing and building new cars for Skoda and other group brands.

    VW Group's luxury Audi brand began sales of three full-electric SUVs in India in July. The models start at $133,0000, putting them out of reach of most buyers in India where 95 percent of cars are sold for less than $20,000. VW Group's Porsche brand will launch its Taycan EV in India next year.

    Skoda and VW brand are considering selling EVs in India, but would need to see lower import duties, stable policies on taxation and long-term incentives, Boparai said. Development of charging infrastructure will also influence its decision, he added.

    India taxes fully-built imported cars, including EVs, as high as 100 percent, but the government is discussing a proposal to slash rates to as low as 40 percent, after Tesla's appeals for a cut.

    This has triggered fissures in the auto industry, with global players such as Daimler's Mercedes-Benz and Hyundai Motor supporting the proposed cuts, but domestic rivals such as Tata Motors opposing them, saying they would hurt India's push to increase local production.

    "I'm not at all saying that local manufacturing should not be encouraged ... but duty of 60 percent and 100 percent is prohibitively high at this juncture," said Boparai, adding that to manufacture EVs locally there first needed to be more demand.

    Skoda's Boparai expects India, the world's fifth-largest car market, to lag behind Europe and China in electrification.

    VW Group, which aims to overtake Tesla as the world's largest EV maker by 2025, is investing billions of dollars to transition to battery-powered cars, which it expects to account for half of its global vehicle sales by 2030.

    India is the world's fifth-largest car market but Boparai expects a lag in electrification compared with Europe and China because of the high price of battery-powered cars and lack of local charging infrastructure.

    Boparai said he expected demand for EVs to begin at the high end of the market and trickle down, as seen in markets like the U.S. where Tesla dominates electric car sales.

    In India there was also a need for affordable EVs and demand for that would begin with ride-hailing or corporate fleets, he said.

    "Establishing EVs is a lot of hard work. Not really having a clear roadmap and not reducing duties will slow progress towards EVs -- both adoption as well as manufacturing," he said.

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